In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately.
-------------------------- CASH +A/R + MARKET SECURITIES/////////////// CURRENT LIABILITIES

• Shows different accounts as percentages of a total
o Ex. Income statement shows each amount as a percent of Sales • Allows you to see the percent differences between years • Shows number of cents invested in each type of account for each $1 of total

• If an income statement only showed the % of Sales columns for 2008 and 2009, it would be referred to as a common-size income statement
• If a balance sheet only showed the % of Total columns for 2008 and 2009, it would be referred to as a common-size balance sheet • The removal of dollar amounts serves to focus the user more on the relationship of each line item to the total o Often used to compare different companies in same industry regardless of relative size

• Involves calculating the dollar change and percent change for each line item on the income statement from the previous year to the current year
• From this you can determine which items helps Net Income increase faster than Sales and the line items which dragged it down